Last week we talked about the key attributes that make up your core activities. Remember, your core activities are the main things you do in your business and the key attributes are the inputs, process steps, outputs, desired outcomes, and metrics of each core activity.
Inputs are the things that go into your process steps. Inputs can be data, forms, people, or a host of other things.
Process steps define what happens in your activity from start to finish. Each step builds upon the previous step and feeds into the next step until the activity is ended.
Outputs are the things that come out of each process step. It’s common for the outputs from one step to become inputs into the next step.
Desired outcomes are the reason or reasons your business does the activity and the results that you are looking to gain.
Metrics are measures that give you insight into how an activity is performing.
If you want a deeper refresher, go back and read last week’s post here.
Inputs, Process Steps, and Outputs
In short, inputs are changed into outputs by process steps. Anything done by workers in a business is done to facilitate this concept. Inputs are taken, they are processed in some way, and outputs are created that are more valuable to a business than the inputs. This value might be created for paying customers or could be value created specifically for the business.
An easy example of this is to think about the company that manufactures cars. This example is a little bit simplistic but should help you understand the main points. The car manufacturer starts with inputs in the form of rubber, metal, glass, and electronics among other things. These inputs get fed into the company’s manufacturing process steps. Components are made and assembled, glasses installed, wheels are manufactured and added to what eventually becomes the output, a.k.a. the car. It’s painted (paint is another input) and eventually shipped off to a car dealership to be sold.
The inputs like rubber and sheet-metal aren’t valuable to most consumers. But, the car manufacturer can make them valuable by processing them into an output that is valuable to most people in the form of a car.
Inputs and Outputs for an Internal Process
Some activities are internally focused and don’t produce outputs that are purchased by customers. This doesn’t mean they are any different, but are quite the same, in terms of inputs increasing in value through process steps that create outputs.
For example, any company that’s bigger than a few people has activities related to hiring staff. The activity of recruiting new employees as inputs, process steps, and outputs, just like making a car. Some of the inputs into a recruiting activity include the needs of the business, a job description, and benefits information.
There are process steps involved that include posting open jobs to job boards, processing incoming applications, interviewing qualified candidates, and making a hiring decision.
These process steps have outputs. An applicant goes through the process step of that phone screen and turns into the output of a rejected candidate or a qualified candidate. That qualified candidate is an input to the process step of an in-person interview. The in-person interview step hopefully produces the one candidate you want to hire as an output and so on until the person is hired and this activity is over.
Outcomes and Metrics
Outcomes are the results and impact you get from performing the activity. Sometimes multiple activities influence or create a single outcome.
Thinking about our car manufacturer, they might have the desired outcome of creating happy customers that love their cars. While the car contributes to reaching this outcome, it’s not the only thing that feeds into happy customers that love their cars. Other activities including the sales process experience and ability to get financing contribute to a customer feeling happy about their purchase.
Any company can create outputs but only the companies that can define and achieve the right outcomes will be successful long-term.
Metrics allow us to understand things like effectiveness, efficiency, and productivity of the things that we’re doing the products that we’re making. Metrics tell us how much steel is used to produce our car, how much steel is wasted in the process, and helps us measure the quality of our car when it’s finished. Metrics can tell us if we have happy customers or dissatisfied customers, helping us understand if we are reaching their desired outcomes. Without metrics, you will have no idea if you’re doing the right things or if those things are sustainable over time, both critical to understanding how to be successful over time.
What does it all mean?
Understanding the relationships between the different key attributes helps you understand how to fix problems in your business. At the end of the day, all any business owner cares about is reaching the desired outcomes whether that be to have money and time to help your favorite charity, spend more time with your family, or be able to buy the nice things that you desire.
If you’re not getting the outcomes you desire, understanding this relationship between attributes will help you pinpoint the problems and make the corrections needed to improve your outcomes. Ultimately, there is no other way to change your outcomes than to change the inputs and process steps of your core activities.
An Example – Birthday Parties
Here’s an example of putting this all together. Imagine you are throwing a birthday party and the desired outcome you want is to have the best party that any of the attendees have been to this year. What would you need to make this happen?
Everybody will define this slightly differently but for now let’s define this as having good food, the right cake, some activity like swimming or karaoke, and the right people.
To make this happen there is an activity specific to getting the food. There’s an activity specific to creating the cake. There is activity specific to getting karaoke working, and there’s activity in getting the right people to attend.
If we think about the activity specific to making the cake, we can define the inputs. You’ll need flour, sugar, spices, frosting, candles, etc. there is a process involved which includes things like mix the dry ingredients, mix the wet ingredients, mix everything, grease your pan, pour the batter into the pan, bake it, etc.
Each process step has inputs and outputs. The step of baking the cake has inputs of a greased pan and batter. The output includes the baked cake. That baked cake is an input into our next step which is to frost the cake. Inputs into this next step include the baked cake and frosting while the output is a frosted cake.
A metric we would have that tells us if we did a good job or not is the happiness level of all of our guests at the end of the party. If everyone’s happiness level is really high that everything is great and we don’t need to do anything different next year. But, if we have some unhappy guests or marginally happy guests, we haven’t reached our desired outcome. If we have no other metrics we will be left to guess which part of the party they didn’t like. While it’s possible we could guess right it’s more likely we will guess wrong and not understand what we need to improve to make our party better. If we had a few basic metrics such as how many people ate cake, how many people liked the cake, and what are the reasons people didn’t eat cake, we could rule out or rule in the cake and its contribution to us not reaching our desired outcomes.
Assume we got the metrics and we can see half the people that ate the cake didn’t like the flavor. We now have good insights into what to fix to make our next party better. To fix it, we go back to the inputs into the cake and make our changes there. We might use different spices next time, or more sugar. Maybe we forgot the eggs, or put on too much frosting.
The other potential culprit is our process and process steps. We could have baked the cake too long and it came out burnt. We could have done a poor job mixing their ingredients and had a lumpy cake.
Ultimately, the only way to achieve different outcomes is to address problems with your inputs and with your process steps.
Back to Business
Making improvements in your business work the same way. When you’re not getting the outcomes that you want, you need to identify the activities and outputs that relate to that outcome, and then change the inputs and process steps within those activities. Understanding how all of these things relate helps you focus your time and energy on the right things that will help you optimize for outcomes.
- Inputs, through process steps, become outputs
- The process steps add value to the inputs
- Outcomes are created by one or more outputs
- Outcomes are the results of your outputs and outputs are the results of your inputs and process steps
- If you want different outcomes, you need to change your inputs and process steps
- Metrics will help you make data-based decisions instead of guessing